Israel-Hamas War Sends Oil Prices Soaring – All You Need To Know
The deadly Israel-Hamas conflict in the Middle East has sent tremors through the oil markets, causing prices to climb to $94 a barrel.
Global oil market prices have climbed for two consecutive weeks since the war, reigniting fears among economists and oil traders that markets could breach the $100 a barrel mark.
Many worry an escalation of tensions could drive oil prices far higher by choking a key transit route for seaborne cargoes of oil and gas.
War’s Impact On Oil And Gas Supplies
To date, oil and gas flows from the Middle East have remained relatively unscathed despite the conflict. The recent rise in prices has been fuelled by fears over potential export disruptions.
Israel has shut down production at its giant Tamar gasfield. This has limited gas flows to Egypt, which typically exports about half of its gas via seaborne tankers, often to Europe.
Despite Europe’s record high levels of gas storage this winter, prices have climbed this week after a tanker seeking to fill up LNG in Egypt left empty and diverted to another port.
War’s Escalation And Impact On Energy Markets
Market observers expect the US may soon toughen its sanctions on exports of oil from Iran due to Tehran’s close links to Hamas and Hezbollah.
The Strait of Hormuz in the Gulf is responsible for the transit of more than 20% of the oil consumed globally and a third of the world’s seaborne gas shipments.
If Iran sought to block the route this would have major implications for Europe’s supplies of gas from Doha, the world’s top exporter of LNG.
Assessing Middle East’s Biggest Producers
Saudi Arabia, the de facto leader of the Opec+ oil cartel, is now producing about 9 million barrels of oil a day, similar to what Russia – a key ally of Opec+ – produces each day.
For these countries soaring oil prices would bring rich economic rewards, but only to a certain point as high costs can cause economic activity to slow and dent demand for oil.
Although Riyadh and Moscow continue voluntary oil output cuts, they could always reverse the decision if a global oil price shock threatened to erode overall demand.